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Common exam mistakes on 2281 The factors of production. Learn what loses marks, then practise the topic with Examiner’s Ink.
Examiners often test the distinction between the factors. Be precise. For example, do not confuse 'capital' (machinery) with 'money' (financial capital). Similarly, distinguish between the entrepreneur who earns profit for risk-taking, and a manager who earns a wage for their labour.
No. In A-Level Economics, 'capital' refers to physical, man-made assets like machinery and buildings that are used in production. Money is 'financial capital' and is used to purchase these capital goods, but it is not productive in itself. It facilitates production but is not a direct input.
Occupational mobility refers to the ease with which a factor can switch between different uses or jobs (e.g., a farmer's field being used for housing, or an accountant becoming a teacher). Geographical mobility is the ease with which a factor can move from one location to another (e.g., a worker moving from London to Manchester for a job). Land is geographically immobile but can be occupationally mobile.
No. If an entrepreneur pays themselves a fixed salary, that payment is considered a wage for their labour input (as a manager). It is a cost to the business. Their profit is the amount left over after all costs, including their own salary, have been deducted from the firm's revenue. Profit is the reward for risk-taking, not for their day-to-day labour.